Audit + Risk, another pairing of soul mates!
But dear auditor, a word of warning... If you have landed here looking for a discussion on inherent, control and detection risk, then I fear you have strayed off course. But before we chase you back to your browser in search of the more traditional couplings, stay with us awhile and discover how managing another category of risk is vital to your career in audit. Welcome to Audit Advantage, our regular exploration of the expertise and aptitudes you need to broaden your audit wings and operated as a fully-fledged T-shaped professional.
Have you heard of VUCA?
Back in September last year when we launched this series, we spoke of the reality of the twenty first century workplace, a world of turbulence and chaos, a shifting landscape, transforming before our very eyes. And we warned that the complexity, density and tempo of change decrees a whole new set of competencies, attitudes and behaviours for the auditor.
In the meantime, you may have identified with the term 'VUCA', increasingly popping up in the business lexicon. A somewhat menacing acronym, VUCA simply translates as Volatility, Uncertainty, Complexity and Ambiguity and neatly encapsulates the current environment in which we operate.
And it is the lack of predictability and the ubiquitous uncertainty and ambiguity that concerns us today as we consider risk. Very few of us can avoid the VUCA phenomenon; increasingly we may be called upon to take managed risks, make decisions without knowing all the facts and recover from failure and setback with rapid and applied learning.
'Risk comes from not knowing what you are doing' Warren Buffet
What sort of risk are we talking about here?
Dictionary definitions suggest that risk involves exposure to danger or loss, but I'd extend it, in this context, to anything where the outcome cannot be predicted with a degree of certainty or which heralds a foray into the unknown.
- Making a non-linear or non-traditional career move
- Experimenting with an unfamiliar communication style, say a non-directive, coaching converse rather than an instructive one
- Taking on a task outside your comfort zone (how about your first board presentation?)
- Breaking bad news or giving difficult feedback
These are just a few examples - familiar to the point of being the bread and butter of professional life!
But, I wonder, how often you let these risk-taking activities just happen? They come to you when it is your time and you deal with them, as and when; in other words, you take a passive approach to risk.
There is another way, and we have touched on it previously in discussions on developing a Growth Mindset. What about choosing to take a risk, looking for extra stretch, striving to maintain control and thus building up your risk muscles? To survive and thrive in the twenty first century professional landscape we need to adapt, be agile, to take a risk...and live with the consequences.
I'm an auditor...get me out of here!
You probably consider yourself logical, analytical and risk averse - led by your head rather than your heart perhaps - after all that's what auditing is all about. So how do we reconcile the auditor with the need to embrace risk, uncertainty and ambiguity?
Many, many times in writing my career columns I have advised digging deep below the surface of your technical skills to unearth the value-add, the transferable expertise and experiences. Now I'm going to ask you to try it the other way round.
Consider what you already do in your technical role to evaluate risk.
In assessing susceptibility you would consider some key factors: the possibility and probability of what can go wrong and the impact and materiality; the context, environment and external factors; the degree of uncertainty and the cumulative effect; the weakest link and the tipping point. You would also examine mitigating factors that reduce risk: the availability of support or resources, control or corrective processes, track record and experience, and you might reflect on what went wrong in the past and how adeptly this was dealt with.
Your final decision or action would be founded on hard data, analytics, reasoning and logic, but it would also involve exercising judgement and possibly applying a measure of gut instinct in the final analysis. This is how you make an informed decision and manage risk in auditing. And that's exactly the sort of transferable learning that you can apply, and must apply, to the rest of your professional life.
As an auditor, you are uniquely equipped with the training and experience to manage risk. You have a process and I would urge you to use that process, to take control and meet the VUCA world head on. It's time to evolve, to adapt and to try something different in the way that you go about your work, manage yourself and relate to others.
'The biggest risk is not taking any risk...In a world that is changing really quickly; the only strategy that is guaranteed to fail is not taking any risk'. Mark 'facebook' Zuckerberg.
Which topic would you like to read about next month? Look over the list of topics in the original Audit Advantage article here and let us know your choice for the next topic we should cover.